Thursday, July 21, 2016

I think I need another savings account

I am financially conservative, but I intentionally violate a practice that I often hear suggested by other financially conservative people (like Dave Ramsey):
I use a credit card for as many of my purchases as possible except groceries.  
(But we pay off our credit card every month.  So far in my life, I've never carried a balance from one month to another).

I have a very good reason for using my credit card a lot.  Actually I have two.  

I. Putting it on credit card provides me a record of what I've spent, where I've spent it, and the date on which I spent it.  

I know myself, and I know that on the occasions that I spend cash, I end up having no idea what I spent money on.  The cash is gone, and I cannot remember where it went.  What did I buy?  Where did I buy it?  And I hate that feeling of having no idea where the $50 in my wallet went.  

If I put it on credit card, I save the receipt.  All credit card receipts go in a special "Credit Card" folder above my desk.

(I also use my debit card for expendables, like groceries or household cleaning items, for this same reason:  a paper trail for me to notate in my checkbook.)

II. Putting it on credit card provides me with cash back bonuses.

Every time we have a cash back bonus, I funnel the money into our Christmas savings account.  In the past year, I've put over $500 into that account from cash back.  That is $500 of essentially free money to me (and it is free to me because I don't carry a credit card balance from month-to-month and don't pay anything beyond 0% in interest.)

I feel like I'm violating a code of frugal people by admitting this.  I may be shunned.

Here is another financially conservative faux pas of mine:  I don't use the envelope system of saving.

The "envelope" system has never been appealing to me.  I tried to institute a virtual envelope system years and years ago.  I would earmark a certain amount of money in various categories each month.  Ultimately, at the end of the month, I would need to buy milk and give myself 40 kinds of guilt and grief because I didn't have any money left in my "grocery" virtual envelope, but we were totally out of milk and needed it.  I may have had $500 sitting in all of my other envelopes not being used for anything, but I felt terrible taking $3 to get milk.  D thought this was ludicrous.

Eventually, I did too, and I decided to come up with a better system for us.

That system is to squirrel a bunch of money into various savings accounts.  I think it is called something like the 80/20 rule.  We have the following:

Escrow--we pay our mortgage and homeowners/car insurance out of this
House-- for repairs/maintenance and improvements
Car-- for repairs/maintenance and, assuming we can ever save a sizable chunk, for the purchase of     other cars when ours conk out.
Fun-- for vacations, concerts, performances
Medical-- for medical costs.
Christmas-- for Christmas gifts/expenses

The money leftover is used to pay utilities and groceries.  Anything beyond that.....fair game.

I have been thinking lately that we might need to add another savings account category, which would be Clothing.  We definitely don't spend a lot of money on clothes, but inevitably, everything hits at once.  In June, N needed soccer cleats.  We also had two rounds of family photographs, so I needed to buy some things for those.  The boys had outgrown their summer pajamas, so I had to purchase some of those.  Even if you find sales or shop consignment (as I do), when you are purchasing for three kids, it adds up.

I do keep a budget using, and that allows me to see how much, on average, we spend in various categories.  The one thing I don't like about mint is that when we do spend a bunch of money on something (like the bathroom remodel for which we paid cash), it puts us in the red, which makes me feel like we've been horribly irresponsible people.  It doesn't matter if we had saved $16,000 for the past however long to be able to do that remodel and spend that money.  That part screws with my money psychology.

I guess there is no perfect just have to find the system that allows you to save and spend in the most efficient and non-guilt- and stress-inducing way for your family

No comments: